I Borrow, Therefore I Am!

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A recent study led by Ohio State University Professor Rachel Dwyer yields a shocking, appalling, and mostly just terrifying conclusion: Many young people feel empowered by their student loan debt — and even by their credit card debt.

According to a press release, “Researchers found that the more credit card and college loan debt held by young adults aged 18 to 27, the higher their self-esteem and the more they felt like they were in control of their lives. The effect was strongest among those in the lowest economic class.”

“Debt can be a good thing for young people – it can help them achieve goals that they couldn’t otherwise, like a college education,” added Dwyer.
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But that doesn’t answer the question of why high credit card debt also seemed to correlate with increased self-esteem. The research is interesting, but there are a few problems with the conclusions:

  • The fact that people with a lot of debt seem to have high self-esteem might just suggest that people who are cocky are more likely to take on debt; overconfidence leads them down a path of excess leverage. We’ve been taught that self-esteem is always a good thing, and that’s been a major philosophical motive behind education over the past few decades. But books like The Narcissism Epidemic: Living in the Age of Entitlement and Generation Me: Why Today’s Young Americans Are More Confident, Assertive, Entitled–and More Miserable Than Ever Before have raised important questions about all the negatives that can result from a culture that prizes self-esteem.
  • Could it be that borrowing a bunch of money to buy cars, food, and college has become so normalized that it’s seen as part of growing up? The unemployment rate is too high for having a job to really be a sign of being an adult; but owing a bunch of companies money? That’s what adults do.

Whatever the correct interpretation of the data, the results are scary. The good news? According to the study, positive feelings about debt turn negative as people get older — and realize that their salaries won’t increase as rapidly as they thought they would, while their interest rates rise more rapidly than they could have imagined.